Smile! You’re at the best WordPress.com site ever

Main menu

Post navigation

Annals of the Great Recession VI.

The “Great Recession” led to much head-scratching. How could this disaster have come about? Who or what was responsible? How should we proceed going forward. Many books have poured forth in an attempt to answer these questions. Four of them take a critical look at the the materialism that drives modern life. The books raise more questions than they answer. The questions are worth some thought.

People used to live with scarcity we can’t imagine. They had to work very hard just to have enough to survive on. Then industrialization and the agricultural revolution created abundance. People had to work very hard to have enough, then later to have a lot of stuff. Now people ask what to do with this abundance. Consideration of this question can lead people into areas that will be unfamiliar to most people.

The philosopher Michael Sandel argues that people start to think of money as the solution to everything, instead of just as a situationally-appropriate tool.[1] Moreover, “the more things that money can buy, the more the lack of it hurts.” Economic inequality leads to experiential inequality.

The writers Robert and Edward Skidelsky identify certain “basic goods”: health, security, respect, “personality,” harmony with nature, and leisure.[2] How much is “enough”? Should people continue to produce and consume ever more? What do people get out of having more stuff or more activities? Should they make do with less to have more time? What would they do with more time? Among their solutions: tax consumption, not income; tax spending on advertising. What if the prescription for the good life offered by the Skidelskys conflicts with what most people want?

Luigi Zingales argues that Americans used to think that capitalism was a “fair enough” system, even if it wasn’t perfectly fair.[3] The economist Alan Meltzer argues that Capitalism is the only system that produces freedom and prosperity.[4] It makes no claim to produce virtue or stability. This means that freedom and prosperity have an ugly reverse face. However, “corruption, fraud, and greed” are common in all other systems, and less likely to be corrected than under capitalism. What concerns Meltzer and Zingales is the government response.

American government tends to provide benefits to selected businesses without thinking about actually helping society as a whole. For example, the mortgage interest deduction helps the construction industry, but amounts to a tax on renting that makes it less reasonable. Similarly, subsidies for ethanol amount to a tax on regular gasoline. Zingales thinks that both education and health-care are “protected” industries. They need to be exposed to competition.

It also tries to control the flaws. Very often these efforts at “reform” miscarry. For example, government seeks to correct for inequality of result by means of paying benefits funded by debt (the obligation of future generations to pay for benefits enjoyed by the present generation) or by regulatory systems that favor present established interests over newcomers.

Similarly, people who behave immorally need to be publically shamed even when they cannot be prosecuted. Bankers have taken their share of this, but someone needs to go after the “jingle-mail” borrowers. They decided “enough is enough” and abandoned their obligations and assets. Probably not the answer the Skidelskys and Sandel had in mind.